USA. “Some companies could fall off the edge within a month. It’s hard to say for each one but a large number of them are at risk right now. If they don’t get relief within weeks, we could lose them.”
That’s the stark, acute reality for US airport concessionaires today amid the COVID-19 crisis, according to Airport Restaurant & Retail Association (ARRA) Executive Director Rob Wigington.
As reported, ARRA and its counterpart organisation the Airport Minority Advisory Council (AMAC) have jointly urged US airports and Congress to ensure financial relief measures for their members, airport restaurateurs and retailers.
The associations represent a US$10 billion industry made up of firms of varying sizes, including many small and local businesses which contribute US$2.5 billion to airport revenue streams.
Reflecting on the recent sharp decline in business, Wigington said: “In just a matter of days we saw business fall by -25-30%, which quickly plummeted to -50-60%, and within weeks we went from record passenger levels to virtually nothing. It is staggering. Airport have lost 95-98% of all traffic and concessionaires have lost all of their sales.”
The reality now is that this is all about survival for concessionaires large and small.
“The companies we represent are hard hit and figuring out how to cope. They are losing business, losing employees and just trying to survive. What is comes down to in immediate terms is relief from MAGs, rents and other fees associated with operating at an airport. The companies we represent simply cannot pay.”
ARRA and other associations are calling for a lengthy moratorium on airport minimum guarantees and rents, to allow retailers to remain in business.
Wigington said: “There should be a 12-month waiver on all rents across the board. Even being optimistic, it may take at least that long before these companies can get back to the kind of business that allows them to survive, never mind thrive.
“The passengers won’t be there, the revenues won’t be there, so the basis of contractual agreements is just not there. We have to write off this year.
“Let’s take a deep breath and waive those fees, minimise the damage, and ensure companies have the cash to stay in business. Then we must be ready to go again. It’s important that all stakeholders are ready to go once they open the gates, planes are flying, passengers are back and we are resuming business. This industry has much to catch up on and many losses to make back. We cannot afford a slow recovery.”
In addition to waiving fees, ARRA has called for leasing programmes to be deferred, and current solicitations to be suspended, a move Wigington said is simply “logical” in the current climate.
He acknowledged that solutions to the concession fees question need to be agreed airport by airport (as confirmed by the latest Federal Aviation Administration guidance).
“Concessionaires have no control over the situation and their agreements are contractual and legal, so the airports will have to provide that relief. Each one has different circumstances and agreements in place. They will have to sort through that in each case to ensure the airport remains viable. We understand the balance of interests and know concessionaires are an important part of that of balance, so they need to be considered.”
Click on the icon to listen to Rob Wigington speak about the challenges for concessionaires as part of our Podcast series, In Crisis – Travel Retail Voices.
As reported, under the recent Cares Act, US Congress awarded about US$10 billion in grants for airports to support them during the pandemic. This, argues ARRA, should feed down to support business partners.
“Within the legislation that was approved there was US$10 billion for airports in grant money with almost no strings attached,” said Wigington. “What is important is they can use it for operating expenses, as they must. And we support that. We know the airports need help; now we need concessionaires to also be supported.
“Airports have capital programmes, many of which are on hold now. Once they resume there are many decisions about how they go forward and how that effects concessionaires, build-outs and other expansion. We’re waiting to see what Congress can provide in terms of stimulus. Aviation will be a big part of that and there could be opportunities to help concessionaires on that side too. If airports get more capital to build and expand, the concessionaires have to be equally equipped to help that growth.”
As noted above, the big decisions made today are not simply about rent, they are about securing the future.
“This is a longer term process,” said Wigington. “We have to hire people back into companies once we get passengers back travelling for example. What is crucial is that these companies can survive. So many of them will not survive if this persists and if they are not granted relief. They must be in a position, just as airports and airlines are with Federal assistance, to start up again. Once airlines fly once more, and passengers return, airports will be back in business. When that happens, these companies need to be in a position to go full throttle.”
In making the case for financial assistance, the industry can point to the 125,000 jobs that concessions activity supports at US airports.
“At about US$2.5 billion a year in revenues, this is a significant part of airport revenues that assists airports in maintaining their facilities, ensuring capital projects proceed and paying back bonds. We know also that these companies are deeply rooted in their communities, providing jobs and paying taxes locally.”
There’s a human cost of course too.
“The companies we represent have many employees who have been around a long time,” said Wigington. “It’s not an employee base that comes and goes so it is devastating for many people who have been loyal for years. The companies want to hang onto as many of their people as they can and help them through this. And at the same time they must be able to re-hire once this passes. Operating at the airport is not the same as on the street, with many different processes, security clearance and so on. That makes the needs of our members more complex.
“We know that concessionaire employees make up a large part of the airport workforce. They are really the front line for dealing with customers. They supply the experience that airports want to provide, and that passengers demand. So they are hugely important.”
Wigington and the ARRA board are acutely aware of the many interests they serve, from local minority business partners in the Airport Concessions Disadvantaged Business Enterprise programme (represented by the Airport Minority Advisory Council) to the supplier community.
“We are working hand in hand with AMAC on this, and our interests are tightly wound together. We have members from the same communities, and we are concerned about small and large, disadvantaged, minority or women-owned companies who are at risk. The industry operates on very thin margins and some of these businesses are tied to the larger companies. We are all working together as best we can to address our needs.
“It’s very difficult and goes beyond those who we represent. If our companies can maintain operations and survive, then that also helps the producers and distributors.”
We asked whether this crisis might prompt a rethink of the whole concessions model?
“That’s the critical question once we get back to business,” said Wigington. “How will the airlines change? We cannot assume that industry looks the same in the future. Airports cannot expect that the airlines will come back in full with the capacity they had. How they reintroduce service will drive a lot of what happens.
“What lessons will we learn, how will this change our relationships and how will we be better prepared in future? We cannot be in a position to rely on emergency assistance from Congress. We must ensure somehow that the industry has the ability to endure. Something like this will happen again at some point so it’s a big question that we all need to address. We want the industry to get together and be full partners in this and address the business relationships.”
As a new organisation created by US retail and food & beverage concessionaires to represent their business, ARRA has been thrust into the firing line by this crisis. Naturally, there was no knowing this would appear as the fledgling body was just recruiting members, but Wigington says it has brought people together quickly.
“We are on the right path. Although ARRA is new this has brought our organisation together faster than it would have done. There’s nothing like a crisis to mobilise people. I’m pleased to see that across all company sizes and backgrounds, we are seeking solutions to help each other and help the industry. We want the industry to survive and come through this. We have made our voice heard and we will continue to raise that voice for our members.”
